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Banking Machiavellianism

Get ready. With new consumer regulations in place or on the way, banks will be more aggressive than ever -- in their effort to protect income.

Let's start with the Fed's measure that takes effect this summer. Banks have to get customers to agree to "opt in" to overdraft coverage for their checking accounts. If customers don't agree, they won't be able to overdraft, which means no fee income for the banks. Those who opt in will be "protected" from overdrafting, but there are no limits on the penalty or the number of times it can be imposed.

The banks' marketing campaigns range from subtle to alarming. In recent weeks, Chase has tested several direct-mail pitches to see whether an assertive or alluring tone will drive people into a branch to sign up for overdraft coverage. "Watch your mailbox so you can say 'Yes' to continue Chase debit card overdraft coverage," read one note, a toned-down version of an alternate letter warning consumers that their debit card might not cover unexpected emergencies, like a highway tow.

Bank consultants see an opportunity here as well. They're encouraging banks to go with an aggressive opt-in strategy, and here's why:

Depending on your situation and your customer base, this strategy could involve a targeted and multi-channel initiative to encourage customers to opt in. A recent FDIC study indicated that 93 percent of NSF activity is being driven by 14 percent of the accountholders. And an amazing 68 percent is being driven by just five percent of accounts. These consumers average $1,610 in NSF fees annually.

In other words, if you have a history of overdrafting, your mailbox will overflow with reminders that you need to opt in. Hell, they might even take you out to dinner.

If you don't already hate your credit card company, see how you feel in 20 minutes. Did you finally think you'd caught a break when the government tightened laws to protect consumers? Well, the credit card companies were way ahead of everyone...

Sorry to say, the cat-and-mouse game between consumers and credit card issuers is hardly over. Many of these tricks are still legal and thriving under the new law, along with many more loopholes that banks are eager to test.

It's always the Catch-22 with financial regulation. As well-intentioned as it might be, banks will find ways around it. And whenever the noose tightens on the banks, customers need to be more vigilant than ever to protect themselves.